Earn Entrepreneurship

The Financial Checklist For Starting Your Own Business

Lindsay Tigar  |  April 14, 2022

There’s so much to think about when you start your entrepreneurial journey. Here’s a checklist to make sure you’ve got the money part right.

Like many optimistic entrepreneurs, when I started my company three years ago, I didn’t fully understand what I was signing up for. My company is a digital content marketing agency, and in school, I was trained as a journalist — I didn’t study business. So, I learned everything in real-time, tackling each challenge as it inevitably came. Luckily, I had plenty of savings to get me through the natural ebb and flow of customer acquisition, client management and retention, and some of the unexpected expenses of owning a company. Once I was up and running, I found myself wishing more than anything that I’d had a checklist to set myself up for financial success — which is exactly why I created this one.  

It may seem daunting at first, but getting on top of your company’s money matters is an essential first step of your leadership road ahead. After all, as accountant, consultant and author Donald Williams Jr. reminds, you’ll need to be responsible for the management, organization and registration, taxes, business license, potential lease for office space, computer hardware/software, furniture, sales and marketing, and eventually, possibly inventory and labor. Whew! 

Yes, it may feel overwhelming, but with the right steps, you can amp up and get started ASAP. Just check these boxes first:

Get real about your monthly expenses 

This may seem like a simple at-home budget exercise, but without one, how can you know how much money is going in and coming out, and how much money you’re realistically able to put towards your company, before you have much revenue coming in? Your budget question is perhaps your most important first one, says Shea Keats, a founding advisor at Breakaway Bookkeeping & Advising. For your initial budget, Keats says to include all the big-ticket recurring items — rent, utilities, insurance, car payments, 401(k), student loans, credit card payments, and so on. And don’t forget about the smaller ones, including any monthly subscriptions, like Netflix or your gym membership. (That latter category is where you may be able to cut back on some things in order to make room for initial business expenses.)  Lastly, turn your attention to your non-fixed spending, which tallies how much you spend on groceries, eating out, coffee, shopping, gifts, and so on.

Calculate both your ideal — and bare minimum — budget 

Armed with the figure on how much you’re spending each month, you can now set two crucial budgets. To begin, Keats says to answer this question: “How much will you need to bill and work each month to make your desired salary?” This helps you to understand your ideal, liveable budget, which includes both necessary and unnecessary expenses. This budget is your monthly goal to work toward since it provides the type of lifestyle you’re hoping to achieve. However, it’s not the only calculation to create. 

Next, Shea says to do the exact opposite and create the bare-bones budget. “This is the absolute minimum amount you need. This budget should not be extremely austere, but should cut out the majority of extras,” she says. 

Set aside personal and business emergency funds 

Though no one wants to give energy to those anxious worst-case scenario thoughts that pop up from time to time, you’ll need to have a plan B at all times as an entrepreneur. Part of feeling at ease about your future is having an emergency fund set aside to prepare for the mishaps that often happen in the early stages of a business, says Tae Lee, the founder and CEO of Never Go Broke, Inc. She suggests having three to five months — or more if you can swing it – to cover both business and personal expenses. “Making a profit in a business can take time. When starting your business, it can take you anywhere from months to possibly a year to see a positive cash flow, so it is important to continue the course,” she adds.

Monitor your spending from day one

Since you now have your parameters, it’s vital to track every purchase, says Jess Kennedy, co-founder, chief operating officer and general counsel of Beeline. “Sitting down and knowing how much it’s going to cost you to start your business, keep it running, and how much you’ll need to earn to make a profit will save you a lot of hurt down the line,” she says. As she warns, you don’t want to get nine months in and realize you didn’t budget for taxes — or that if you lose that one big client, you can’t pay the bills. 

“A lot of businesses fail due to not monitoring their spending. Knowing how much you need to get started and how much you need to make to grow are important numbers,” she adds.

Identify your risk tolerance

To go out on a limb and start your own venture takes courage, guts and a good ‘ole leap of faith. Whether you realize it or not, you have an appetite for risk as an aspiring entrepreneur, but the key is to understand your comfort level, says Suzy Holman, the founder of Jovi. “There will be times when you wonder what the heck you were thinking starting a business. Every successful entrepreneur has been there,” she says. “Take the risk, plan, plan, and plan some more, and don’t get discouraged when you stumble along the way. You’ll be surprised at how many punches you can take when you’re working towards something you’re passionate about.”

Consult professionals

One of the most impactful ways to prepare yourself for owning a business is to seek the counsel of experts who specialize in your weaker areas. Maybe you’re an excellent writer — but numbers cross your eyes. Or, perhaps you’re great at marketing, but you draw a blank when it comes to business insurance. Kennedy says it’s worthwhile to book appointments and hire these professionals. “They’ll be able to tell you what regulations you need to adhere to, give you finance and tax advice on how much you’ll need to spend, and how much you’ll need to make to run your business,” she says.

Structure your business correctly, and be sure to keep personal finances separate from business finances

When you decide to incorporate and create an LLC, an Inc. or an S-Corp, open a business banking account, too. As much as you can, separating your personal and professional expenses (along with income streams) is a smart financial tactic, according to financial wellbeing coach Jernessa Jones. “The separation in financials makes matters a lot easier and cleaner when it is time to prepare your business taxes and properly calculate deductions,” she continues. “Invest in accounting software that is easy to manage for a beginner. If this is too daunting of a task, be prepared to hire an accountant that can help keep you organized, compliant and help you understand your financials’ dynamics. You are responsible for knowing your business.”

Set and track your goals 

One last nugget of advice from Chelsea Kim, head of operations at BELLA: If you are quitting a job to focus on your business fully, make sure you have SMART goals: specific, measurable, attainable, relevant, time-bound. By ensuring all of your aspirations meet these requirements, you give yourself the ability to analyze along the way, regroup, make a change, and most importantly: keep going! 

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